The Cost Advantage of Combining Your First, Second Mortgages
Consolidating your mortgages into one major loan takes some serious decision making. There’s too much at stake with your current loan commitments, the market value, and your equity. But if the opportunity presents itself, such as when your finances are going well and existing interest rates are at an all-time low, then maybe it’s worth a shot.
The benefits
Rolling two mortgages into one can either prompt your current lenders to keep you, or other lenders to acquire you. And if you have substantially earned equity, you might be showered with the best offers in town, with more discounts in tow. Otherwise, you need to expect either a) a higher interest rate and/or b) a need to carry a private mortgage insurance.
But all these aside, you need to get focused on what really matters – savings.
It’s all about cost
No matter how attractive consolidation offers, if it does not result in savings, you might just be better off delaying one of your refinances, or refinancing both separately, whichever arrangement is deemed more cost-efficient.
But today, there are various lender packages that offer handsome advantages with guaranteed savings benefits. A large loan is a large risk, but it’s an attractive risk for many lenders – larger loans offer bigger security. Many borrowers who are following this option are using it as bargaining power over lenders who put forward the best interest rates.
This is not the only advantage – you also only get to pay for one round of charges instead of paying for separate ones.
Since you have better leverage at your options, you should instead shift your focus to comparing the aspects of your choices – the amortization, structure of interest, interest percentage, fees, and charges, etc.
At the end of the day, it all depends on what your intended plans for the future are. If you are planning to cash out, a consolidation may not be the option you need. But if you want to take advantage of your equity, save closing costs, or save, overall, then refinancing your two mortgagesis definitely a choice to look into.